Petrobras invests more in ethanol production

LOS ANGELES, Dec. 28 -- Brazil’s state-run Petroleo Brasileiro SA (Petrobras) has entered into two new agreements aimed at further enhancing its presence in the fuel-ethanol market.

Petrobras subsidiary Petrobras Biocombustível SA (PBio) and Petrochina International Co. Ltd. signed a 6-month memorandum of understanding for joint studies to assess the technical and economic feasibility of developing ethanol production projects in Brazil.

Petrobras said the agreement comes as large areas in China need to mix ethanol with gasoline and that China has insufficient supplies. For its part, Brazil already mixes ethanol with gasoline in a combination that includes 25% ethanol.

The MOU with Petrochina follows an earlier agreement in which PBio acquired 40.4% of shares in Minas Gerais sugarcane ethanol distillery Total Agroindustria Canavieira for 150 million reais.

Petrobras said Total has a distillery in Bambui in Minas Gerais, with the capacity to produce 100,000 cu m/year of anhydrous ethanol. It said the partnership seeks to raise installed capacity to 203,000 cu m/year.

Petrobras said participating in ethanol is in line with the firm’s strategic plan, and will help meet its ethanol production and marketing goals. Altogether, Petrobras envisages investments of $2.4 billion for ethanol and biodiesel production in 2009-13.

Petrobras currently accounts for 15% of existing ethanol capacity in Brazil, which is the world's largest producer and exporter of sugarcane-based ethanol.